SATS Ltd - RHB Invest 2016-04-01: JV agreement with Oman Air

SATS LTD S58.SI

SATS Ltd - JV agreement with Oman Air

SATS Ltd (SATS SP) signed a JV agreement with Oman Air for cargo handling at Muscat International Airport.

Under to the agreement, Oman Air will transfer its cargo handling business to its wholly-owned subsidiary Oman Air Cargo LLC. SATS Ltd will then acquire 33% stake in the cargo subsidiary SGD22.5m. The deal is expected to be completed in 2Q16.

While we see long term earnings growth potential form the JV, the deal is not expected to contribute materially for SATS’s near term earnings.

We maintain NEUTRAL and DCF-based SGD3.70 TP (6% downside) as a net cash balance sheet, stable dividend yield and continuing earnings growth (mostly from cost reductions) in a weakening economic environment would continue to support SATS’ current expensive valuation.

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